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Test for ‘old-style’ transfer of economic entity requires multifactorial approach

08 March 2017

The Employment Appeal Tribunal (“EAT”) has ruled that an employment tribunal, in finding that the termination of a franchise agreement gave rise to a relevant transfer under TUPE, made the mistake of focusing on one particular factor and failing to adopt a multifactorial approach assessing all the relevant circumstances.

Facts of the case

Alno, a kitchen manufacturer, entered into a franchise agreement with SJM Kitchens and Bathrooms (“SJM”), which was owned by a Mr Mant. SJM was a kitchen and bathroom showroom, which offered a design and installation service.

Mrs Turner was employed by SJM as the showroom manager. SJM gave notice in mid-2014 to terminate the franchise agreement and Mrs Turner went on maternity leave in July 2014. It was initially anticipated that Alno would take over the lease of the showroom and employ both Mr Mant and Mrs Turner, but Alno and Mr Mant could not agree on the terms.

The franchise agreement ended in December 2014 and, when Mrs Turner’s maternity leave ended in February 2015, there was a dispute between SJM and Alno as to whether there had been a TUPE transfer. Mrs Turner brought a claim against both parties.

Mrs Turner contended that this was an “old-style” transfer under TUPE - that is, the transfer of an economic entity which retains its identity (as opposed to a service provision change). The employment tribunal determined that there had been such a transfer, relying mainly on the fact that the parties had intended that the business would transfer from SJM to Alno.

The EAT’s judgment

Alno appealed to the EAT, arguing that the tribunal had placed too much reliance on the intention of the parties and had failed to make the multifactorial assessment that is required in determining whether there has been an old-style TUPE transfer. The EAT identified various factors which, as part of such an analysis, pointed towards a transfer not having taken place. These included:

  • SJM continued to pay Mrs Turner after the alleged transfer date.
  • Mr Mant was not employed by Alno after the alleged transfer date.
  • The showroom was not open for almost 18 months after the alleged transfer date, due to delays with construction works (and it was not open at the date of the tribunal hearing) - so there had been a significant cessation of work.

The EAT emphasised that the correct approach is to: (1) identify the economic entity; (2) complete a multifactorial assessment to determine whether there was a transfer of that entity. While the employment tribunal is entitled to have regard to the intention of the parties, this will not be decisive. Having regard to the various factors summarised above, the EAT concluded that no transfer under TUPE had taken place. Accordingly, Mrs Turner had not become employed by Alno.

Implications

This is a sensible decision, consistent with previous authorities (e.g. Cheesman v R Brewer Contracts Ltd [2001] IRLR 144). It provides helpful confirmation of the correct approach in determining whether there has been the transfer of an economic entity which retains its identity. The tribunal in this case evidently became overly fixated on one specific factor – the apparent intention of the parties – when a more comprehensive overview of all the relevant circumstances clearly showed this was not a TUPE situation.

Alno (UK) Ltd v Turner and another UKEAT/0349/15 – judgment available here

 

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